Older Consumers Carry More Debt, Risk
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Older consumers have long been considered sure bets when it comes to auto finance. While they remain the safest group by age, there is some rising risk.
A recent study by a trio of economists finds that older Americans are holding more debt than their counterparts did two decades ago – mostly due to the purchase of more expensive homes and putting less down.
Oliva S. Mitchell, a professor at The Wharton School of the University of Pennsylvania., is one of the study’s authors
She said they started looking at credit patterns among older buyers when they noticed Baby Boomer women were working longer into their 60s. It seems one reason is the higher debt their households have.
“This means that they are carrying more debt into retirement and are more vulnerable to rising interest rates than in the past,” Mitchell said. “While no one knows for sure how the economy will evolve in the next several years, based on past experience it appears that the rising Federal deficit will drive inflation up, and in turn, interest rates. This will make everyone holding existing debt – especially adjustable-rate debt – more risky.”
If older consumers hold more debt than before, extending credit to this age group becomes riskier, Mitchell said.
Analysts at Experian found the same trends as Mitchell’s group, as reported in the firm’s latest “State of Credit” report.
The Experian report goes on to state that Baby Boomers have the lowest late payment instances of all the generations, but they need to continue their positive credit behavior as they take on more debt.